CPA Blog

What’s your charitable donation deduction?

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Published: Friday, 26 February 2016 13:18

Written by Phillip Strickler, CPA.CITP

When it comes to deducting charitable gifts, all donations are not created equal. As you file your 2015 return and plan your charitable giving for 2016, it’s important to keep in mind the available deduction:

Cash. This includes not just actual cash but gifts made by check, credit card or payroll deduction. You may deduct 100%.

Ordinary-income property. Examples include stocks and bonds held one year or less, inventory, and property subject to depreciation recapture. You generally may deduct only the lesser of fair market value or your tax basis.

Long-term capital gains property. You may deduct the current fair market value of appreciated stocks and bonds held more than one year.

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5 ways to cut costs and improve cash flow

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Published: Wednesday, 17 February 2016 11:45

Written by Phillip Strickler, CPA.CITP

When business owners start to feel the choking effect of a slow cash flow, they often blame their customers. “Why aren’t we getting paid on time?!” But it’s important to remember that cash flow is affected by a variety of elements. For example: Operating expenses and overhead can have a significant impact. Here are five often-missed ways to cut costs and improve cash flow:

1. Review your rent or mortgage. Can you negotiate a lower rent with your landlord or refinance your mortgage? Also look into whether you may not need as much office space if you’ve begun to allow many employees to telecommute.

2. Implement energy efficiency improvements. You’d be surprised by how much of a difference little changes can make to lower your utility bills. For example, draw the shades in the summer and adjust the thermostat a few degrees. Or look into whether it’s time to make an upfront investment in better windows or HVAC equipment.

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How to max out education-related tax breaks

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Published: Tuesday, 16 February 2016 14:15

Written by Phillip Strickler, CPA.CITP

If there was a college student in your family last year, you may be eligible for some valuable tax breaks on your 2015 return. To max out your education-related breaks, you need to see which ones you’re eligible for and then claim the one(s) that will provide the greatest benefit. In most cases you can take only one break per student, and, for some breaks, only one per tax return.

Credits vs. deductions

Tax credits can be especially valuable because they reduce taxes dollar-for-dollar; deductions reduce only the amount of income that’s taxed. A couple of credits are available for higher education expenses:

1. The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.
2. The Lifetime Learning credit — up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.

But income-based phaseouts apply to these credits.

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Is it time to get accountable with your employees’ expenses?

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Published: Wednesday, 10 February 2016 15:37

Written by Phillip Strickler, CPA.CITP

Many companies start out, and get pretty far down the road, using the “per diem” approach when reimbursing employees for lodging, meals and incidental expenses. Doing so involves the use of either IRS tables or a simplified high-low method to reimburse workers up to specified limits.

The per diem approach is relatively simple and doesn’t involve too much record keeping. But it also puts businesses at risk if they exceed the per diem limits, exposing them to IRS penalties and employees to higher tax liability. For this reason, companies often reach a point where they create an “accountable plan” for handling employee expense reimbursements.

Reaping the tax advantages

An accountable plan is a formal arrangement to advance, reimburse or provide allowances for business expenses. The primary advantage is that your business can deduct expenses (subject to a 50% limit for meals and entertainment), and employees can usually exclude 100% of advances or reimbursements from their incomes. Workers whose jobs involve frequent travel may realize significant tax savings.

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